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NY Independent System Operator Outlines Steps For Integrating Distributed Resources

The NY Independent System Operator recently issued a plan for addressing the nuts-and-bolts issues associated with integrating distributed energy resources (DERs) into the wholesale electricity market.  The NYISO says its Distributed Energy Resources Roadmap for New York’s Wholesale Electricity Markets is “the first step in building (the) grid of the future” and seamless transition “from a primarily central station-based grid to a diverse bi-directional grid.”

Background

New York is implementing a sweeping “Restoring the Energy Vision” initiative (REV) aimed at a substantial transformation of electric utility practices to empower customer choice and encourage greater penetration of clean generation and behind-the-meter resources.  To help accomplish these objectives, the NY Public Service Commission  adopted a comprehensive policy framework for a reformed retail electric industry aimed at increasing distributed energy resources and dramatically changing the role of utilities.  DERs will become integral tools in the planning, management and operation of the electric system, placing them on a competitive par with centralized options.  The current retail utilities will serve as a platform to provide uniform market access to customers, distributed resources and aggregators.

 The NYISO Roadmap 

The Roadmap’s primary goals are to integrate DERs into the NYISO’s wholesale electricity markets and to align with the goal of New York’s REV initiative.  The document sets out a framework for developing market design elements, functional requirements and tariff language to integrate dispatchable (i.e., controllable) DERs into the wholesale electricity market.

The Roadmap identifies the following concepts and issues to be addressed through the NYISO’s  stakeholder process and offers initial proposals on some of them.

Aggregation.  Individual DERs  will be allowed to aggregate so they can meet wholesale market eligibility and performance requirements.  The rules related to DER aggregation will be the foundation upon which the remaining rules are built, and will be the first concept developed in the market design process.

  • Aggregation rules will be technology agnostic. A single DER aggregation could include a heterogeneous mix of different technologies, such as load reduction, generation, and storage technologies that, when combined, can meet dispatch instructions. However, the NYISO will explore whether homogenous aggregations can provide additional or different services than heterogeneous aggregations and therefore be valued differently.

  • The geographical footprint of DER aggregations will be limited to those resources connected to the same bulk transmission node. This limit will help ensure DER compensation in the wholesale markets reflects the aggregation’s locational and temporal value on the bulk power system.

  • Aggregations must be a minimum of 100 kW in total size. However, the NYISO is not proposing a minimum size restriction for individual DERs that are part of an aggregation.

  • The market participant interfacing with the NYISO on behalf of an aggregation will be a DER Coordination Entity (DCE), which may be customer, a third-party aggregator, or a distribution system platform provider. Coordination practices among the DCEs, the utilities and the NYISO will be developed.

            Measurement and verification.  DERs will be scheduled and dispatched in a manner comparable to traditional generators. DERs will also be held to compliance obligations comparable to those of traditional generators. The NYISO will develop performance criteria and compliance metrics for dispatchable DERs.

  • Aggregations must provide real-time telemetry data for operations and monitoring, and after-the-fact meter data for settlement and billing on the same basis as traditional generators. However, the NYISO may allow small aggregations (of less than 1 MW) to provide real-time data from a sample set (at least 30%) of DERs in the aggregation.

Performance obligations.  In general, DERs will be expected to have the same obligations as traditional generators.

  • In capacity markets, DERs desiring full capacity payments will be expected to be capable of delivering capacity for a full 24 hour period, comparable to what is expected of traditional generators. However, some DERs are unable to deliver capacity in all 24 hours due to their physical characteristics but are still valuable to the system.  The NYISO intends to develop additional service tiers for those DERs.

  • DERs selected in the day-ahead market auction will have an obligation to offer into the real-time market, just as do traditional generators.

  • Performance obligations will be set at the aggregation level, not at the individual resource level. Thus, an aggregation will be allowed to meet its obligations from various resource types.  For example, if an aggregation is scheduled for four hours, the aggregation may meet its obligation by discharging storage devices for two hours and by load curtailment for the remaining two hours.

Dual participation in retail and wholesale markets.  Many DERs will be connected to the distribution networks and would like to provide both wholesale service and retail service, thereby accessing multiple revenue streams.  However, except for certain existing demand response programs, simultaneous participation is a new concept to the NYISO.  According to the Roadmap, the issues that need to be addressed include:

  • Whether the NYISO or the distribution system platform provider has operational control over a DER in a given interval, and whether that changes depending on the services provided.

  • The appropriate communications paths for a DER when participating in wholesale and retail programs.

  • How do the NYISO and utilities address conflicting market signals? A market signal from NYISO may conflict with the market signal from the distribution system platform provider and vice versa.  The DER’s response to multiple signals could lead to operational and reliability issues.

  • Can individual DERs in an aggregation participate in both wholesale and retail markets, or is participation on an aggregation-wide basis?

  • If a storage resource charges at a wholesale rate and discharges to an end-use customer through a retail program, does the electric storage resource become an LSE by engaging in sales for resale? What regulatory issues are implicated by occasional sales for resale?

  • What is the FERC’s view of simultaneous participation in wholesale and retail markets?

Pilot program.  The NYISO has a 2017 initiative to develop a framework to enable small, limited scope pilot projects to be tested in the wholesale markets.  These will help the NYISO understand how integrating various new technologies will affect NYISO systems.  The pilot projects will not be eligible to set market prices.

Granular pricing.  Accurate prices are a critical element of encouraging efficient decision-making.  The NYISO now delivers real-time price signals at a zonal level.  However, areas within a zone may experience conditions that are not fully reflected in the zonal price. Thus, pricing at the zonal level dilutes incentives for DER to locate in areas that could provide significant benefits to the grid and the market.  Accordingly, in a pilot project, the NYISO currently posts more granular price signals reflecting location specific system conditions at select locations.

According to the Roadmap, market designs for all of these concepts are expected to be completed in 2018, to be followed by software development and implementation.  A target date of 2021 is set for implementing dispatchable DER rules.

NYISO’s CEO, Brad Jones, said the Roadmap would help to  “highlight opportunities for more emerging resources to participate in our markets. It will guide developers, communities and others as they seek to invest in a more flexible and dynamic grid.”

© 2022 Covington & Burling LLPNational Law Review, Volume VII, Number 48
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About this Author

Wilbur C. Earley, Energy attorney, Covington Burling
Energy Policy Advisor

Drawing on has over 39 years of experience in the energy industry, Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers, a natural gas pipelines and hydroelectric facility licenses, and LNG export authorizations.

202-662-5434
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